Criminal Investigations Against Auditors, Consultants of Kabul’s Central Bank Underway

Lucas Gilmore, “Big 4″ observer
April 13, 2011 /

Following the suspension of Deloitte’s contract with Afghanistan’s central bank on March amid investigations by the United States Agency for International Development (USAID) into its systemic corruption, Afghan President Hamid Karzai has vowed to conduct a separate criminal investigation against several entities responsible for the collapse.

Karzai told reporters in a press conference that the member firms of Deloitte LLP, units of PricewaterhouseCoopers LLP, and BearingPoint Inc. would not go unscathed after their role in the collapse of the Kabul Bank.

The announcement was made one week after the Securities and Exchange Commission and the Public Company Accounting Oversight Board charged PricewaterhouseCoopers units in India for violating audit rules and standards.

Five PwC units in India agreed to pay $7.5 million to settle charges of abetting the financial fraud in Satyam Computer Services that overstated its financial reports by $1 billion.

In the latest development of the Afghan central bank‘s case, Karzai showed resolve to go after those that need to be held into task for failing to prevent the major financial fraud in Kabul Bank.

According to the president, Afghan authorities will prosecute everyone responsible for the central bank’s collapse, including the Afghan nationals and foreign entities. The Afghan government lamented the suspension of foreign financial aid coming from different entities, including the IMF and several other countries, upon the discovery of the financial fraud.

The USAID hired BearingPoint and Deloitte Consulting LLP in 2003 to advise the central bank in developing the financial sector of the country and regulating the commercial lenders.

Then the problem went worse when A.F. Ferguson & Co., PwC’s affiliate in Afghanistan, made erroneous audits into the bank’s financials according to the Afghan Finance Ministry.

An independent review commissioned by the USAID in September 2010 found that the central bank issued fraudulent loans of about $900 million to its shareholders. According to the bank’s inspector general, the total amount was 94 percent of its outstanding loans.

Karzai told reporters that all the stakeholders of the central bank would also be held into task if they would refuse to repay their loans within one month.

However, the president did not give comments when asked if that would include his younger brother who held seven percent of the central bank’s stock.

Upon recommendation of the  International Monetary Fund to put the central bank into receivership, Abdul Qadeer Fitrat, governor of the bank, expressed his opposition, saying the bank still has the chance to regain financial health and stand up again as one of Afghanistan’s key player in the banking sector.


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